The 3-Bucket Strategy for High Yields

Well, good day and welcome to the One of a Kind Financial Show Daily. I'm Mike Milligan. It's Monday, June 22nd, 99 days before I turn 50 years old. That countdown will continue through September 28th. The bond market is open, the stock market is open, and we are 96 hours away from the most important inflation print of the year. Today we're gonna set up the week and we'll tackle the biggest trending question on YouTube right now. Where do I park my cash? Let's go.

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Coming back from the Juneteenth long weekend, here's the lay of the land. The US-Iran 60-day ceasefire signed last Tuesday is holding, but barely. Iran's Revolutionary Guard has threatened the Strait of Hormuz again, while the US Navy is guaranteeing passage of millions of barrels of oil daily. Oil is sitting around $78 in overnight trading after almost a 10.6% weekly drop last week. That's the single biggest reason your gas pump number is moving down and should continue this week. Let's look at last week's market scorecard. Even with the Federal Reserve's news last week that, uh, in their dot plot release saying that no more Fed rate cuts are expected this year, which is a change from the previous. Statement. The markets were still up with the S&P 500 up about 1% last week. NASDAQ was up 2.7%, fueled by SpaceX among other things, and major other AI stocks. And the Dow Jones average was the laggard last week. The story underneath the market returns last week was a market of a story of money moving into the market. $55 billion in global equity inflows. That's a 19-month high with $38 billion of that going into US stocks. Investors are ignoring rate fears and chasing AI and tech. This morning, futures were a little bit lower as of the production of this podcast, a pause in market movement before the big week of data ahead.

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So here we are. Here's the most important week of the year, of the entire summer really, so far for inflation data. I need you to memorize these 4 moments. Today on Monday, there's no major economic releases, Although Fed Governor Christopher Waller will speak, and the US Treasury will run a 3-month and a 6-month bill auction. So let's watch and see what those are priced at and see how investors rate the decision of the Fed from last week going forward on short-term rates. So Tuesday, the S&P Global Flash PMIs, consumer confidence, Existing home sales are all released before market. Carnival Cruise Line's also going to report earnings before the open. So we'll get a read on how the consumer is spending money, although they're being pressured by inflation. On Wednesday, new home sales are reported. FedEx will announce their earnings after the bell. They're the global shipping bellwether. Micron Technologies also reports after the bell. That stock has rallied 15% in just in the week leading up to this, to this report. On Thursday, this is the big one, May core PCE price index, the Federal Reserve's preferred inflation gauge. The consensus is a 2.6% year over year, but core inflation is expected to tick up 3.4%. Also on Thursday, the final Q1 GDP number is released, durable good orders, weekly jobless claims, personal income and spending. But here's the key one. If PCE comes in hot, the October rate hike trade accelerates. If it comes in soft, the relief rally is back on. And then let's close the week out on Friday this week. With advanced trade balance and the final University of Michigan consumer sentiment. That will also be the quarter-end window dressing, and we're gonna look for some institutional rebalancing as we approach the end of the second quarter.

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So with all that set up, here's today's lesson. You know, my personal mission is to educate, coach, and plan. And this ties directly to what is trending in personal finance YouTube right now. High yield cash management. Where do I park my cash? Is a high yield savings account better than a CD? What about T-bills? Those are major videos with a lot of traction and a lot of views on YouTube right now. Let me give you the simple Mike Milligan framework. I call it the 3 bucket cash stack. Bucket 1, spending cash. This is your checking account. Pay the bills, pay the credit card, pay the mortgage. The goal, as little as possible, just enough to cover 1 month of expenses, as long as cash flow is replenishing that account on an annual, on a monthly basis. Interest rate on that is probably zero, and that's fine. This bucket is about access, not yield. Bucket number 2, this is where your emergency and short-term cash goes. 3 to 6 months of living expenses. This belongs in a high-yield savings account or a money market fund. With the Fed sitting at 3.5% to 3.75% on their rate, the best high yields are paying about 4% now, with some online vendors creeping up to 4.25% annual percentage yield. That's free money for liquidity. You need. Don't leave bucket 2 at Bank of America earning 0.01% and tell me you're worried about inflation. Let's fix that bucket today. Today. And then bucket 3, cash you don't need for 6 to 24 months. This could be for a big purchase, a home down payment, a planned tax payment. This bucket goes into some sort of interest rate ladder, whether it's treasuries, MYGAs, tax deferral, whether it's CDs, 4 weeks, 13 weeks, 26 weeks, 1 year, 2 years. Right now you can get yields above 4%, some approaching 5%, some almost to 6%. And depending on the type of ladder you go in, some can be tax deferred, some can be staked. Tax-free. There's a real after-tax bump when you put a tax strategy around bucket number 3. Here's the key, and this is what fintech almost always misses. The right answer is not a product. It is 3 solutions to address the problem of cash keeping up with inflation. If you pile everything into a CD, you lose access. If you pile everything into a savings account, you leave yield on the table. Well, if you pile everything into T-bills, you can't pay the plumber when the plumbing goes out. 3 buckets, 3 jobs. That's the plan. And if you wanna know exactly how much belongs in each bucket, that's where your written one-of-a-kind financial plan comes in. We can compute that based off your income, your expenses, and your timeline so you can stop guessing.

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And finally today, on a quick personal note, I will turn 50 on September 28th of this year. What a time of reflection I am having now based off the first 50 years of my life. My 3 kids who are adult, my wife, Leanna, and I making the courageous move to live in Puerto Rico, becoming independent 12 years ago from a financial standpoint after leaving the halls of Wall Street, the conference rooms where it was profit first, people getting lost as account numbers and stories being buried under systems of one-size-fits-all sameness. Uh, as I march toward this 50 years old, I believe that between 50 and 60, I will accomplish more in that decade of my life than I have in my first 50. So I'm on a journey. If you want to see Like my journey over the next 100, follow me on LinkedIn, Mike Milligan, CFP. Go to Instagram, oneoakradio.com, or One Oak Financial. And if you want to follow me on Facebook, it's Mike Milligan. See, today's reflection is, uh, as I move toward 50, the best cash bucket I ever built was the one I refused to touch because discipline beat yields. It beats yield every single time. That's your Monday, June 22nd edition of the One of a Kind Financial Show Daily. Set up your week, fix your cash buckets, and meet me back here tomorrow with the flash PMIs land, and we talk about whether the consumer is still spending. If you want a written one-of-a-kind financial plan, that's what we do at One Oak Financial. Go to www.oneoakfinancial.com. I'm Mike Milligan, here to educate, coach, and plan. I am an investment advisory representative with Advisory Alpha LLC. Ideas by Mike, doing business as One Oak Financial, is an unaffiliated entity of Advisory Alpha LLC. This podcast is for informational purposes only. All sources for this podcast will be found in the comment section. For— if you have questions, please comment, like, and share this podcast where you view it.

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